Deduct nonbusiness bad debts as short-term capital losses on Schedule D (Form 1040). On Schedule D, Part I, line 1, enter the name of the debtor and “statement attached” in column (a). Enter the amount of the bad debt in parentheses in column (f). Use a separate line for each bad debt.
◎A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor,
◎The efforts you made to collect the debt, and
◎Why you decided the debt was worthless.
For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt.